Let's talk about the most worrying possibility of a rate hike within the year in the market recently. After Walsh's debut last Thursday, the market became concerned about the possibility of a rate hike within the year. Last weekend, the Deutsche Bank report clearly stated that it expected a rate hike within the year, and yesterday's prediction of three rate hikes by the Bank of America within the year scared the market even more. Will it be added? The Fed's interest rate hike is either due to high inflation or an overheated economy. Let's talk about personal opinions: 1. The strong expectation of interest rate hikes in the current market comes from last week's FOMC dot matrix and Walsh's statement https://((x.com))/qinbafrank/status/2067414191846416800? S=46&t=k6rimWSEbo2D2TXolYcM-A has discussed that the dot matrix predictions of the Fomc voting committee still rely on the trend and data before the signing of the memorandum, and in fact, they have not fully considered the trend after the signing of the US Iran memorandum, which is actually an expectation gap. It can also be understood that the memorandum has just been signed, and the future trend is still unclear. The safest way is to use the previous data to make predictions, and make revisions at any time in the future. 2. The most important factor affecting inflation this year is still the oil price after the closure of the Strait of Hormuz. It can be seen from the US CPI in May that the main force of inflation rebound is energy inflation driven by oil prices and some commodity inflation, but the rebound momentum of core inflation highly related to the service industry is still controllable. The signing of the US Iran ceasefire memorandum may bring about a logical reset that previously drove inflation rebound. 3. Several factors affecting the trend of oil prices in the second half of the year: The transportation of crude oil in the Strait of Hormuz has returned to normal; Iran's crude oil export sanctions have been lifted, the 60 day permit has been extended or converted into a long-term agreement, and Iran's exports have stabilized at 1.6 to 2 million barrels per day; OPEC+expansion of production; The UAE's exit from OPEC is likely to expand production as well; Various countries need to replenish their crude oil inventories and increase their reserve demand; 1) The return of the Strait of Hormuz to normal, OPEC+production expansion and UAE+production expansion are the supply forces driving the reversal and decline of oil prices; 2) The supply force can also be calculated when the sanctions on Iran's crude oil export are lifted, but it depends on the 1.5 million barrels exported by shadow ships every day during the previous sanctions against Iran. If the production capacity can be improved after the sanctions are met, the extra part is the new production capacity in the crude oil market; 3) Various countries are replenishing their crude oil inventories. According to a Reuters report, after the Iran War, the world has already consumed about 400 million barrels of inventory, and the construction plans for new reserves in various countries may bring about an additional demand of about 500 million barrels; The total potential demand for replenishment/construction of nearly 1 billion barrels. The core here is the time cycle for replenishing inventory: Completing 1 billion barrels in 2 years would result in approximately 1.37 million barrels per day; If 1 billion barrels are replenished annually, about 910000 barrels per day. Overall, after the signing of the US Iran memorandum, Brent crude oil quickly fell below $80, indicating that the market first cut off the "Hormuz/war/sanctions risk premium". If the subsequent shipping data confirms Iran's shipment and insurance recovery, and OPEC+and UAE increase production, Brent/WTI still has room for further downward correction. Of course, this does not mean that oil prices will plummet in a straight line, but rather: War/sanctions premium rapidly falls → Low inventory and replenishment demand support → If supply recovers and further increases, oil prices will gradually decline. 4. If oil prices decline, inflation is likely to also decrease. How fast will the downward slope of the two core components be? Also, last week's space here https://(x.com)/qinbufark/status/2067519756882833815? S=46&t=k6rimWSEbo2D2TXolYcM-A also talked about the "World Cup effect" in the labor market. American businesses will recruit a large number of service personnel in May and June to cope with the viewing trend of the World Cup. This effect will continue until the World Cup final on July 19th. Once it enters the knockout stage, the demand for service industry personnel is likely to begin to decline. 5. Of course, economic factors also need to be considered In this macro reset logic article in the middle of the month, it was mentioned that the actual momentum of the US economy is stronger than people feel and observe, and last night the S&P global manufacturing and service PMI exceeded expectations, which also proves that the economy is still quite strong. Overall: The decline in oil prices drives down inflation (mainly depending on how fast the decline can occur); The 'World Cup Effect' of Labor Force Withdraws, Possible Decline in Employment“ The economic fundamentals are still quite good, and the spillover effects of AI infrastructure are significant; The attitude of Walsh's debut emphasizes inflation (meaning not only looking at the downward trend of inflation, but also the slope of the downward trend, which is equivalent to setting a high threshold for interest rate cuts, that is, to be very close to 2% before considering it) Combining these points, in my personal opinion: 1) The probability of remaining unchanged without raising interest rates within the year is the highest. Based on the benchmark scenario of not raising interest rates, this corresponds to a scenario where inflation is declining but has not yet reached 2%, and the labor market is falling but not collapsing. 2) Of course, the optimistic version is that inflation is declining rapidly, and the labor market is collapsing due to the "World Cup effect" and the impact of AI, so there is still a possibility of interest rate cuts; 3 (Worst case scenario: If the downward speed of inflation is not fast or even drops to a certain level (in the range above 2%) and enters the plateau period, and the AI infrastructure drives the economy and there is a trend of overheating (meaning that the labor market is still okay), then the interest rate hike we are worried about may really occur. This article is sponsored by @ bitget_zh, titled 'Bitget Buying US Stocks: Instant Entry, Smooth Trading'